Wells Fargo to Mylan: Crises That Could Have Been Prevented

This morning we see four leaders — two each in business and government — facing developing crises. The common factor: All four could have avoided or at least diminished the crisis by facing it earlier, playing offense instead of defense. But they did what most people do, refusing to confront reality in apparent hopes that it will fix itself. To absolutely no one’s surprise except their own, they end up in a hole that just keeps getting deeper.

-Mylan CEO Heather Bresch faces new EpiPen pricing trouble. She has tried fighting back against loud anger over Mylan’s aggressive price increases for its life saving EpiPen. The damage was mostly to Mylan’s reputation until yesterday, when the federal government accused the company of overcharging Medicaid for the device over several years. The direct cost to Mylan could be substantial, considering that Medicaid spent $797 million on EpiPens from 2011 to 2015. Most striking in the whole saga is that Mylan was so oblivious to public outrage over pharma pricing at Valeant Pharmaceuticals and Martin Shkreli’s Turing Pharmaceuticals. Seeing the trend, it could have revised its pricing and made itself an industry leader. It’s too late for that now.

-Wells Fargo CEO John Stumpf becomes less visible, not more so, in the fake-accounts scandal. It’s a common problem: When a leader is overwhelmed by a crisis, he or she becomes consumed by meetings and phone calls at just the moment when a leader need to be more visible. The situation is arguably worse in Stumpf’s case because his only high-profile appearances have been at congressional hearings, giving the impression that he has to be forced to answer questions about the problem. It all goes back a month, when he and the company apparently hoped that announcing it would pay $185 million to settle cases involving over a million fake accounts and the related firing of over 5,000 employees would blow over and be forgotten. This hope was perhaps not realistic.

-New Jersey Governor Chris Christie looks increasingly vulnerable in the Bridgegate scandal. A former ally, David Wildstein, has been testifying for days about the deliberate creation of a massive multi-day traffic jam in Fort Lee, N.J., in 2013 to punish the town’s mayor for not endorsing Christie’s reelection. Each day it gets harder for Christie to keep saying he knew nothing about it. Wildstein has now testified that Christie knew exactly what was happening and why, as it played out, and that he laughed when he heard how severe the traffic problems were.

-New York City Mayor Bill de Blasio is fighting long-standing suspicions of corruption, and he’s losing. It was revealed yesterday that a state ethics panel has served an extremely broad subpoena on City Hall as it apparently widens its investigation of de Blasio’s political non-profit and whether it broke lobbying laws. A number of other investigations are examining other behavior by the mayor, who has hired excellent lawyers to fight the investigators.

As J.P. Morgan Chase CEO Jamie Dimon has observed, your hardest problems do not age well. It’s continually surprising to see high-level leaders forget that fact.

What We're Reading Today

Theranos to close labs Founder Elizabeth Holmes said that the company will lay off about 340 employees as it closes facilities in Pennsylvania, Arizona, and California. Responding to a myriad of regulatory inquiries, Holmes said the company will shift focus to its miniLab platform. It’s a significant step back from Theranos’s original goal of providing blood tests direct to consumers. NBC News

Over a million urged to evacuate as hurricane Matthew approaches As the category 4 hurricane hit the Bahamas, Florida Gov. Rick Scott warned 1.5 million Floridians that Matthew could cause damage not seen since Hurricane Andrew in 1992 if it makes landfall. He has urged residents to evacuate. Residents of Georgia and South Carolina have also been advised to find shelter away from the coast. CNN

Former NSA contractor arrested over leak Harold Thomas Martin III has been charged with theft of classified government property. Officials say he took classified documents home with him for over a decade. He’s also being investigated in the release of hacking tools the NSA used to exploit flaws in firewalls. It’s an embarrassment for the NSA and Martin’s employer, Horacio Rozanski‘s Booz Allen — another contractor suspected of stealing classified information following Edward Snowden in 2013. NYT

Ford chairman met with TrumpBill Ford Jr. spoke with Donald Trump about Trump’s criticism of the company for allegedly moving jobs to Mexico, which Ford denies. The meeting took place a few months ago, and Ford described it as a “great meeting.” But he also described Trump’s continued attacks on the company as “infuriating.” Fortune

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Building a Better Leader

How to channel angerLike any emotion, anger can be used for good if harnessed correctly. If you’re angry about how co-workers behave, find common ground. Then ask yourself, “Am I really being wronged?” Knowledge@Wharton

57% of working mothers say……they would rather be at home taking care of their children. It’s a higher number than some might have suspected. Fortune

Playing up-tempo, happy music in the office……increases a team’s willingness to collaborate. Inc.

Tough Decisions

Yahoo aids government in email searchMarissa Mayer‘s company agreed to modify its security program last year in order to scan for an email signature the FBI had linked to a terrorist organization. Yahoo used it to scan millions of customer emails and reported those that came up positive to the FBI. It’s the latest example of the potential conflict between government officials and technology companies over what they will and won’t do to help uncover suspected illegal activity. ABC News

What went wrong at Lands’ End Less than two years ago, Lands’ End welcomed a stylish new CEO, Federica Marchionni, in an effort to update its line and add customers. But just as her first product line was being introduced, the board fired her. The root cause was likely the usual one when cultural changes blow up: The organization wasn’t ready to accept the changes. Fortune

Marc Benioff responds to Twitter speculation While refusing to discuss specific situations, Salesforce CEO Benioff said “it’s in our interest to look at everything.” He added that he usually passes on most buyout opportunities. Recent reports have said he may be interested in bidding for Jack Dorsey‘s Twitter in order to get the social media company’s user data. CNBC

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Up or Out

Eric Wiseman will step down as CEO of North Face owner VF Corp. at the end of the year. COO Steven Rendle will succeed him. WSJ

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Fortune Reads and Videos

Donald Trump has donated to multiple attorneys general……who were contemplating investigations into his businesses. He gave $140,000 to state AGs or AG candidates over 13 years. Fortune

Government health plans spent over $1 billion on EpiPens……from 2011 to 2015 according to the Centers for Medicare and Medicaid Services. Some lawmakers believe Mylan misclassified the EpiPen as a generic instead of a branded item in order to avoid a required Medicaid discount. Fortune